🏦 Bank Account Types Available for Foreign Companies in India

India is one of the fastest-growing economies in the world and offers a range of opportunities for foreign businesses looking to invest or operate within its borders. For foreign companies to legally conduct transactions in India, opening the appropriate type of bank account is not just a necessity—it's a legal requirement under the Foreign Exchange Management Act (FEMA).

This article explains the various types of bank accounts available to foreign companies in India, their specific purposes, and regulatory requirements, helping international businesses stay compliant and operate smoothly.

🌍 Why Foreign Companies Need Bank Accounts in India

Setting up a bank account in India helps a foreign company:

• 💳 Conduct business transactions (sales, services, salaries, etc.)
• 🔄 Repatriate profits and dividends
• 📈 Manage working capital and operational expenses
• 🛡️ Ensure compliance with Indian tax and foreign exchange laws

Whether operating through a subsidiary, liaison office, branch office, or project office, selecting the right type of account is crucial.

🏢 Types of Entities & Their Account Needs

🔐 Account Types Available for Foreign Companies

🏦 1. Current Account (INR) – For Indian Subsidiaries

✅ Who Can Open:

• Foreign companies registered as Indian subsidiaries (Private Limited Companies).

✅ Purpose:

• Carry out day-to-day business operations.
• Pay vendors, employees, and statutory dues.

✅ Features:

• Operates in Indian Rupees (INR).
• Requires PAN, CIN, Board Resolution, and incorporation documents.
• No interest is paid.

✅ Compliances:

• Subject to Indian corporate and tax regulations.
• GST, TDS, PF, and income tax filings are mandatory.

✅ Note:
This is the most common account type once the foreign entity is registered as an Indian company.

🌐 2. Special Non-Resident Rupee Account (SNRR)

✅ Who Can Open:

• Liaison Offices (LOs)
• Branch Offices (BOs)
• Project Offices (POs)
• Foreign companies not incorporated in India but approved by RBI or AD Category-I banks.

✅ Purpose:

• To carry out permissible business operations for a limited period.
• For inward remittances from abroad to cover Indian expenses.

✅ Features:

• Operates in INR but funded by foreign remittances.
• Cannot receive domestic credits (except refunds or interest).
• Interest-free and non-repatriable unless permitted.
• Needs AD bank approval linked with RBI registration.

✅ Documents Required:

• RBI approval letter (if applicable).
• Proof of establishment (LO/BO/PO).
• PAN (if applicable).
• Foreign parent company documents.

✅ Limitations:

• Cannot make investments.
• Cannot accept revenue from Indian sources unless permitted.

✅ Closure:
Must be closed when the LO/BO/PO ceases operation.

💱 3. Foreign Currency Account (FCA) – For SEZs, EOUs, and Specific Approvals

✅ Who Can Open:

• Foreign companies operating in Special Economic Zones (SEZs), Export Oriented Units (EOUs), or those with specific RBI permissions.

✅ Purpose:

• To receive payments in foreign currencies.
• Useful for export-import (EXIM) businesses.

✅ Features:

• Can be maintained in USD, EUR, GBP, etc.
• Helps reduce currency conversion losses.
• Subject to FEMA and RBI monitoring.

✅ Common Use Cases:

• Import/export transactions.
• Hedge currency exposure.

🛠️ 4. Escrow Account

✅ Who Can Open:

• Foreign investors during mergers, acquisitions, or FDI deals.

✅ Purpose:

• To hold funds temporarily under regulatory supervision.

✅ Features:

• Opened with approval from RBI and SEBI.
• Funds are released upon meeting specified conditions (e.g., regulatory clearance, deal completion).
• Used in IPOs, share buybacks, or FDI transactions.

✅ Example:
Used by a foreign acquirer to hold purchase consideration during a takeover of an Indian company.

🧳 5. Non-Resident External (NRE) / Non-Resident Ordinary (NRO) Accounts

✅ Who Can Open:

• Not for companies but for non-resident individuals (NRIs).

✅ Purpose:

• To manage income earned abroad (NRE) or in India (NRO).

✅ Note:
These are not applicable to foreign companies but useful for individual directors or promoters.

📋 Key Regulatory Authorities

📑 Documentation Checklist (Common Requirements)

• 📄 Certificate of Incorporation (parent company)
• 🌐 RBI/AD bank approval (for LO/BO/PO)
• 📝 PAN card (subsidiary)
• 🧾 Address proof of Indian office
• 📋 KYC documents of directors and authorized signatories
• 🏛️ Board resolution authorizing account opening
• ✉️ Declaration of purpose of the account

💼 Expert Tips for Foreign Companies

• ✔️ Engage a local consultant or chartered accountant to handle RBI and bank documentation.
• ✔️ Open the right account based on the entity type—wrong classification can lead to compliance issues.
• ✔️ Monitor inbound and outbound transactions to stay within FEMA guidelines.
• ✔️ Maintain all bank statements and financial records for audit and compliance checks.

🕒 Timelines

📌 Summary Table

🏁 Conclusion

Choosing the right bank account type is essential for any foreign company planning to operate in India. The decision depends on your business structure, regulatory permissions, and nature of operations.

• 🌐 A subsidiary should opt for a regular current account.
• 🏢 A liaison, branch, or project office must use an SNRR account.
• 💼 For export-driven operations, a foreign currency account offers additional benefits.
• 🔒 For investments or M&A, an escrow account is the compliant route.

With proper planning and support from legal and financial advisors, setting up a bank account in India becomes a smooth and efficient process—paving the way for compliant and successful business operations.

Created & Posted by Navneet
Article at TAXAJ

TAXAJ is a consortium of CA, CS, Advocates & Professionals from specific fields to provide you a One Stop Solution for all your Business, Financial, Taxation & Legal Matters under One Roof. Some of them are: Launch Your Start-Up Company/Business, Trademark & Brand Registration, Digital Marketing, E-Stamp Paper Online, Closure of Business, Legal Services, Payroll Services, etc. For any further queries related to this or anything else visit TAXAJ

Watch all the Informational Videos here: YouTube Channel                                                                                               

TAXAJ Corporate Services LLP

Address: 1/3, UGF, Sulahkul Vihar, Old Palam Road, Dwarka, New Delhi-110078